short answer questions

Questions

Chapter 9

(0.4 POINTS) CLASSIFY THE FOLLOWING AS A GOVERNMENT-ENFORCED BARRIER TO ENTRY, A BARRIER TO ENTRY THAT IS NOT GOVERNMENT-ENFORCED, OR A SITUATION THAT DOES NOT INVOLVE A BARRIER TO ENTRY (FOR YOUR ANSWER TO A THROUGH D BELOW, CHOOSE ONE OF THE BOLDED OPTIONS I JUST LISTED).

An industry in which economies of scale are very small, but demand is comparatively large

1. The city of South Lake Tahoe passes a law prohibiting a new tourism company from entering the local market

An industry in which starting a business is very expensive, variable costs of production are large, and brand recognition is substantial

An industry that has a few small firms that dominate production

(0.35 points) Refer to the information in the table below to answer parts A and B.Revenue and cost schedule for monopolistQuantity
Q
Demand
P
Marginal Revenue
MR
Marginal Cost
MC
Average Cost
AC
1420420200200.00239036095147.50336030090128.33433024095120.005300180100116.006270120120116.67724060150121.4382100200131.25

Using the data from the table above, what is the monopolist’s profit-maximizing level of output?

1. Using the data from the table above, what price should the monopolist charge for its product?
2. (0.5 points) Unlike a firm in perfect competition, a monopoly has the ability to set its own price. Consider a hypothetical monopoly, called Firm Z, that sells a product for which demand is price elastic. Now think back to the relationship between total revenue and demand (from textbook chapter 5). If Firm Z wants to change its pricing strategy to raise total revenue, should it increase price or decrease price? Briefly explain why.
3. (0.5 points) Briefly explain whether a monopoly firm produces at a quantity that provides the maximum benefit to society.
4. (0.5 points) Suppose you are comparing smartphone production in China to smartphone production in Korea. In China, you observe that smartphones are produced by a monopoly firm. By contrast, in Korea, smartphones are produced by many firms all operating in perfect competition. In which of the two countries is smartphone production likely to be more productively efficient? Why?

Chapter 10

1. (0.2 points) Relative to a monopolistic competitor firm, a monopoly firm produces at a _____ cost. (Fill in the blank with either “higher” or “lower.”)

(0.2 points) Relative to a monopolistic competitor firm, a monopoly firm produces at a _____ quantity. (Fill in the blank with either “higher” or “lower.”)

(0.2 points) Relative to a monopolistic competitor firm, a monopoly firm charges a _____ price. (Fill in the blank with either “higher” or “lower.”)

(0.2 points) Relative to a firm operating in perfect competition, a monopolistic competitor firm produces at a _____ cost. (Fill in the blank with either “higher” or “lower.”)

(0.2 points) Relative to a firm operating in perfect competition, a monopolistic competitor firm produces at a _____ quantity. (Fill in the blank with either “higher” or “lower.”)

(0.2 points) Relative to a firm operating in perfect competition, a monopolistic competitor firm charges a _____ price. (Fill in the blank with either “higher” or “lower.”)

(0.2 points) Monopolistic competitor firms produce products that are similar in an overall sense, yet differentiated by certain aspects. In your opinion, do consumers always benefit from the expanded consumption choices that arise thanks to firms engaging in monopolistic competition?

(1 point) Refer to the information in the table below to answer parts A and B. Revenue and cost schedule for monopolistic competitorQuantityPriceTotal RevenueMarginal RevenueTotal CostMarginal CostAverage Cost142$70$9,940$70$604$4$4.25144$65$10,060$60$609$5$4.23146$60$10,160$50$615$6$4.21148$55$10,240$40$622$7$4.20150$50$10,300$30$630$8$4.20152$45$10,340$20$639$9$4.20154$40$10,360$10$649$10$4.21156$35$10,360$0$660$11$4.23 

Using the data from the table above, what is the monopolistic competitor’s profit-maximizing level of output?

Using the data from the table above, what price should the monopolistic competitor charge for its product?

Using the data from the table above, what is the monopolistic competitor’s profit, in dollars, at the profit-maximizing level of output?

(0.4 points) Suppose you want to open a coffee shop. There are other competitors in town offering a similar type of service. What is one way you could differentiate your coffee shop/the service you provide?

(1 point) Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as the prisoner’s dilemma box below shows. Prisoner’s dilemma for Firms A and BFirm B colludes with Firm AFirm B cheats by selling more outputFirm A colludes with Firm BA gets $10,000, B gets $2,000A gets $9,800, B gets $2,100Firm A cheats by selling more outputA gets $10,200, B gets $600A gets $3,000, B gets $400
Assuming both firms know the payoffs, what is the likely outcome in this case? Briefly explain why that is the likely outcome.

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